tv [untitled] CSPAN June 23, 2009 9:00am-9:30am EDT
decade of the buildout of the industry industrial and human capital structure as we sit here today, no official commitments have been placed for a new reactor in 30 years. while the global rebirth are in the infant stages it's to increase in china, japan, russia, the republic of korea and in the united states in other ways. in the u.s. our domestic nuclear industrial infrastructure has severely atrophied. the number of end stamp certifications has decreased by nearly half. while the past five years have seen progress there, it is still a tremendous lack of capacity to support a domestic renaissance. however, we are seeing signs that reactor vendors are serious about changing this both westinghouse and riva have committed millions of dollars to produce reactor components as well as to assemble -- as well as to assemble reactor. while scheduled to come on 2009 and 2011 respectively the rebirth is about to commence. while it is true u.s. facilities will not be able to produce the
largest components of the new plants, at least as planned, it is not unreasonable to capacity would be built domestically. the past two years alone to triple capacity. just two years ago the japan steel works was the only option for many plant manufacturers requiring the largest heavy foraging but in the next few years it's expected facilities in england, russia and korea will join jsw and china has already appeared to reached that status. many of these facilities were built to expand -- to build or expanded to have nuclear expansion in their own countries. however, with these facilities expected to annually produce upwards of forty complete sets of pressure vessels and related components there will be spare capacity to support new reactors elsewhere including the united states. whether or not u.s. facilities are built and/or expanded to produce such exponent is frankly an economic question largely dependent upon the continued process of licensing and construction of new builds in the coming years.
we have seen steady progress in the past five years as well with growth expected to increase. a recent report produced by the oak ridge national laboratory found that continued expansion enrollment in graduations for nuclear engineering programs at all levels and it showed sustained increasing every year over the previous year. as with the industrial infrastructure the rapid growth in nuclear engineers demonstrates market signals in the united states work. as more and more utilities show levels of commitment to build new reactors the required infrastructure is coming online in support. i think the situation is best summarized, if you build it they will come. the evidence already supports this and we have yet to see a single board officially decide to build a new reactor. some of the obstacles, though. while we have seen progress on many fronts, no utility has made an official decision to build a reactor. the nrc is in the midst of reviewing license applications under a approved but untested
licensing regime. all the reforms and improvements look great on paper but until the first construction operating license is issued not many utility boards are going to commit up a quarter of an company's value on a single project. the one policy that looks to address this issue with the greatest affect and efficiency is the loan guarantee program applicable to new nuclear reactors. while progress in this program has been slow since it was nooktd almost four years ago, it's not possible to overstate how crucial this program is for some new construction. especially for utilities operating in deregulated states. if there is to be the massive commitment to new builds that some have called for it must be expanded and modified as is done in the comprehensive energy legislation that was favorably reported by the energy resources committee several of you are members of last week. it is important to address the role the federal government supporting any energy source for a project. we firmly believe that the private sector operating within the confines of a market economy is the best arbiter of the most efficient use of private capital to meet the country's energy
needs. in some narrow instances market inefficiency market involvement. to further the energy goals of the country is one example. the instance of loan guarantees should not be considered a subsidy. while they inherently increase the risk to the taxpayer, a properly functioning program will not result in the expenditure of any taxpayer dollars. and this is especially accurate for new nuclear reactors. and in conclusion, the united states faces many challenges as it relates to energy environmental policies. nuclear power is certainly one of the primary technologies that can have measurable impact on increasing our energy security through affordable and reliable base load electricity while also continuing to improve environmental impact with no greenhouse gas emissions. certain federal policies like loan guarantees are appropriate to foster greater expansion. i would note, however, that nuclear power alone is not the answer to our energy challenges. we cannot afford foreclosured technologies that advance our national interest. a balanced portfolio is
essential to a secure energy future as well as a cleaner environment. thank you. >> thank you very much. mr. book? >> thank you, mr. chairman, members of this conference for the privilege of contributing to your discussion today. i neglected to include a biography and i'm grateful to stood in as my biographer but i have to correct one mistake. i am not a lawyer. i went to the fletcher school of law and diplomacy which prepares one to be neither a lawyer nor a diplomat. [laughter] >> and so i'm, in fact, an economist who studies energy policy. >> the truth in accreditation. >> it's certainly -- if you take that in great inflation, i'm not worth much. the point of my testimony is largely distillable from 17 pages down to about three points. energy is a commodity and price is what matters. expectation set at a moment of economic weakness are unlikely to be valid when things return to normal and the question of what happens next depends on realistic expectations about
costs. the energy sources that look the most expensive today like nuclear power and clean coal could be the cheapest on a per unit environment. i treat at in some length of my testimony the limitations of models. this is, of course, somewhat of a sensitive topic given that i make my living making models. but i do think it's important to remember that there are approximations and not guarantees. attempts to quantify the complex and multistage interactions of dynamic individuals and corporate enterprises using formulaic simifications static assumptions and historical data will always be imperfect. modelers are biased or myopic. one example the idea of being able to know when firms are going to past through costs. you don't know. sometimes when your customers is doing a really badly that's a allowsly to raise price but when demand has picked back up and everyone is doing well that might be the good time for price inflation. it's tough to know those things.
these are constraints that we have to keep in mind 'cause those sticky behaviors are going to change reality. it also means we want to keep changing our models. with that said, i want to talk a little bit about some of the three points. the purpose of our discussion today is really generation and so i'm starting there. coal is most of our electricity but since 1995, the share of coal in our utility generation falls by 2.5% and the share of natural gases has risen. it's not a static quantity. we are dynamic and we actually change our generation mix in our fleet based on fixed and variable costs. the sorts of things that private firms worry about. now, wind has grown fast and nonhydrorables are 3% of the whole and fossil sources are 72% or generation mix and so that means anytime you put a greenhouse gas surcharge on this you're going to have higher prices. there's a lot of different ways to look at what those numbers
mean. and on figure 5, for those who dared to read my testimony, on page 8, it goes state-by-state in what we call carbon leverage at our firm. and what that is, is what share of your disposable income gets eaten up for given the price of carbon dioxide and just, you know, to exemplify what small numbers can look like when they're small, they're averages. so in kentucky, for example, $10 per metric ton eats up six-tenths of disposable income. it doesn't sound much but it appears if you're well below the average income of the state. another way to look at it is what happens if you sort of look at that national average on that page. $145 a person direct to the consumer at $10 a metric ton. that's not dissimilar to what cbo's numbers are. it adds up a lot over time. it sort of becomes as part of the whole economy that little 38
one hundredths of 1% when you look at the economy effects. look over through year 2030 and you have a cumulative costs nominally of $25 trillion. just for taking that off g.d.p. if you made the assumption that g.d.p. was going to grow at 3%. g.d.p. might not grow at 3%. that's not a guarantee either and you might have a green economy that generates so much value that the eight tenth of 1% outweighed by something else. it's a big number even though it seems small and i think it's an important point. the other main sort of area that i think we have to remember is that we're sort of yo-yo dieter which is it comes to energy here in the u.s. we binge and starve we crash and starve again. starvation diets break down fat and muscle. the problems if you starve long enough it's easier to get fat and harder to get lean. energy firms are doing that right now. they are going through one of their crashes. they are cutting everything. new capacity in the future and spending for operations now and
that leaves their infrastructure vulnerable to greater dependency on high cost pollution and sources and to encourage leaner growth could spend some of the money we need to build clean energy muscle. electric power demand has gone down four times in the last 59 years. 2009 looks like it's going to be year number five and number five is going to be a doozy. what that means basically is that you're a yo-yo dieter buying a suit when you're at your thinnest. in the real world that means you rip a seam. for the economy it could be price inflation, brownouts or shortages. we shouldn't build our policies at a time when we're at our skinniest and sickiest. what comes next, essentially figure 8 on page 10 shows a picture of what you get in free allowances for waxman-markey. there's a line that goes up and down and falls down starkly at
the end and there's three trend lines my two scenarios and one from aei. they are all above the black line at the bottom of the chart which means no matter what, there's a price, which we know. the second part of it, though, if you look at page 12, the chart there shows what happens if you banked all of your allowances and you bought every offset you were allowed to buy under the program, your best economy the way i'm looking at it, 2023 or 2024 you've got to change your infrastructure. 2026, if things are really sort of grim in all likelihood. that means there's something that has to change in addition to the price you pay for the flexibility. i'll just very quickly summarize. we see these numbers in 50 or 75 or $100 per metric ton were carbon dioxide to be bandied as if they will be the changing for carbon dioxide. it will change behavior, the u.s. economy cannot grow based on our current energy use patterns.
that's not possible today. now, it could be possible in the future but it's not possible today. you also see numbers that say nuclear power is about three times as expensive as incumbent pole when you compare it on the apples on apples basis. they are not all apples. some are oranges. nuclear power and coal plants last a long time and they are in service a lot of the time to time that they're around. that means your per-unit cost of electricity are, in fact, lower than they look at the outset of the project. if you compare that to what could happen say to natural gas prices which right now blow away by far the price of any other source of generation that you could get from conventional, scalable base load sources. those change. and natural gas prices could easily be on a very low carbon price and historical natural gas price way expensive than nuclear power and clean coal. that concludes my testimony and i look forward to any questions. thank you. >> thank you very much. thanks to all of you.
this has been a most fascinating spectrum of opinion and expertise. it's been my experience from my position as former chairman of the joint economic committee in studying the economy that one of the driving forces behind america's economic growth for the last 100 years has been our access to what we would call cheap energy. that without the ability to tap into sources of energy that have been relatively cheap, we would not have achieved the rate of productivity that we've achieved and without being the most productive nation in the world over the last 100 years, we would not have become the richest nation in the world in that period of time. looking ahead, if you look at demographic trends, there are only two countries in the next 50 years who will have increasing populations among
what we consider the developing -- the developed or truly developing countries and those countries will be the united states of america and india. every other country is going to see their population decrease because their birthrate is below the replacement rate. their populations are going to get older and they're going to get smaller. now, our birthrate is below replacement level but the reason we're going to keep growing is because of our immigration rate. so the american population is going to continue to grow and the indian population is going to continue to grow because of their birthrate. while the other nations around us are all going to shrink. and those demographic trends suggest that we're going to need energy in america and india perhaps more than any other place. you've talked about the availability of energy. you've talked about the cost of energy.
as i say, i think we have to have, if we're going to survive in the kind of economy we want, we have to have continued access to cheap energy. so while we've been focusing most of our conversation so far on nuclear, would each of you or any of you have a comment as to this whole question of the american economy needing to have continued access to cheap energy in order to grow and where you think that cheap energy probably ought to come from? okay. mr. rockwell? >> i think the important thing is that we, i think, placed too much emphasis on the idea of having a broad spectrum of energy sources. and i think that for the base load that we talk about, the day in and day out bidding all the requirements, there's nothing in the same class with nuclear. we're used to comparing things
that are a few percent apart but the energy density of nuclear compared to anything to nonnuclear is factors of tens of millions which means in any nonnuclear system, you're going to be using huge quantities of material that has to be gathered up, transported, processed and waste of a similar size dealt with and that's a tremendous burden on the earth and it's also a tremendous cost that you shouldn't have been running into. and nuclear does its job making almost no impact on the earth, whatsoever. and i think the idea that we should have a mix just because it's nice to have a mix, i think that the kind of prices that we're going to pay to develop
wind or solar or biofuels is going to be a large wasteful process and you're not going to have much to show for it at the end. >> well, mr. rockwell, i've been in the plant in france in areva where they reprocessed the spent fuel rods and that has convinced me of the same position you have which says we don't need yucca because we can reprocess them and by the time they end up doing that, the physical waste is really very small. i remember asking the fellow who ran the plant, okay, when you get down to this final product, where there's no more energy left and there's nothing left to do with it and what do you do with it? he said we store it in the green building out back. and i said well, and i looked at the green building, i said what do you do when the green building is full? he said we'll build another building. there's no major underground, huge activity. it's a very small kind of
impact. however, the reprocessing plant itself is not cheap. and there are those who say that it is fairly heavily government subsidized in order to achieve that goal. can you give us something about the -- or any of you about the economics of the reprocessing that goes on where you take the spent fuel rods and put them back through, if you will, and get an enormous amount of energy on them the second time and then it ends up with small globules that you put in the green building, that's a very significant capital investment. my own calculations is that we're going to need, for we go the direction you're outlining, we're going to need several of those scattered across the united states. how do we get there? >> i think -- that's a very important question, and i think
that there are many people who are pushing to get the reprocessing situation built and say, see, we've handled the waste problem and that's the most important thing. i don't think that's right. i think there's no question that we can do this. but for the reasons that you're talking about, i think it's really important that we do it right. and we've stumbled in a lot of bad paths in this process. there is no hurry to get to it. we don't -- we have -- we could go a long time on the once-through process so i think that it's really important to get the right process so that it will be economical and would take whatever time it takes to get that, i'm convinced that we can get there, but i think it would be a mistake to hurry too fast to get it and end up with a bum process. we've done that a couple times already. >> any of the rest of you want to comment on his comment that nuclear can do it all?
>> yes, senator. excuse me. first, i would note that it is french law that they must build a perimeter repository and we might take solace that they had as little luck as we have. they still look to do it in clay repository in the north but have yet to make any progress. they perhaps will continue to extend the loss so they can keep it there while they're doing it but at the end of the day it should be clear that in any regime, whether it's in france, japan, or the united states, we ultimately do need a repository. and while that repository does not need to be yucca mountain, and it may very well have been -- may be a poor choice to follow right now, it remains to be seen on what the future holds. as far as your initial -- your question about cost, about two years ago, before they came in and said they could build a 2,000 metric ton through-put on the order of 15 to $20 billion.
there's a lot of money and there's various ways to finance that. there's several questions surrounding the nuclear waste fund that have yet to be, frankly, even addressed let alone even answered where that money should be going and best leveraged but one of the points that we have made at the chamber is that perhaps restructuring the entire management -- management mechanism at the department of energy and taking it away from the day-to-day role at the department of energy into a government-like corporation and then empowering that corporation with the ability to enter into long-term contracts whereby which that entity could finance the construction of a processing recycling facility -- it could very well be economical but at the end of the day it really comes down to how many reactors we have and what the through-put is. our waste policy, you know, was set 30 years ago but a lot has changed and i certainly agree with dr. rockwell that we do need to take a step back right now and figure out where we're
actually going and then make sure that our waste policy fits with that. and then before i -- before i end, i would say that diversification for diversification sake would be faulty policy but history has demonstrated that diversification is very important to stabilize interruptions whether they be international or domestic. it's important that we utilize the resources that we have at home, whether it be coal, whether it be oil and natural gas. i mean, as we just learned last week, or didn't learn but it was prominently displayed that we have upwards a third more natural gas in reserves than we had perhaps a year ago. at least as far as what was projected. those resources need to be harnessed and especially if you look at the transportation sector. we rely on fossil fuels for 97% of our transportation. i mean, if you were to just magically make that go away which perhaps some wish, i mean, that is a catastrophic affect on the over all macro economy.
>> yes, sir, mr. book? >> i just think that point that mr. guith just made is extremely important about our abundance of natural gas. the question of what this all costs, again, is a function of fixed and variable costs. a lot of people get hung up on the fixed costs of a lot of these plants and one of the points i try to make if you run in it long enough and it runs basically at a controlled price from that point forward it's pretty cheap but right now natural gas is so cheap that it makes all of the renewable green sources that are much beloved to some of the strong proponents you see everyday so expensive by comparison that they simply don't make sense. some of them don't make sense any way because we have a down year for electricity demand. but they also don't make anything else make sense either in terms of whether or not your standard is going to be what is the price of carbon dioxide or what is the price per fuel how much fuel you've got.
we do have an immense amount of natural gas. we have an immense amount of coal. we have an immense of oil shales. we have a tremendous set of uranium deposits throughout of the areas west of the mississippi. we have, in fact, many natural resources that at any given price will make these numbers work. the question is whether they all lend on demand at the same time like with corn ethanol and polysilicon for solar. diversification takes away the price pressure away. as cheap as natural gas now if it became the solution for everything i don't think it would stay that way. >> mr. lieberman? >> what we saw in our model is that high energy costs reverberates under the economy and under the waxman-markey bill will be $9.4 trillion poorer in 2035 as a result of this bill. my concern with cap-and-trade is that many proponents of it don't even seem to believe in their
own product. the whole theme, the whole purpose of cap-and-trade is to send a market signal but obviously if independent of that there are regulatory and legal restrictions on nuclear power, that's not a market signal. and conversely as we've heard with natural gas and the study from the colorado school of mines that finds we have much more natural gas than we -- than we thought, if that natural gas can't be accessed, that's not going to happen any way regardless of the market signal that sent that might encourage natural gas or nuclear power. it's absolutely vital that we make these energy sources available and that means streamlining or eliminating the regulatory barriers to any source of energy. >> senator alexander? >> thank you, senator bennett. this has been very, very helpful and i thank the four of you for your comments. mr. rockwell, you said you just speak from the engineering point
of view. is it possible to build 100 new nuclear power plants of 1240 megawatts or so over the next 20 years? >> i think it clearly is. i thought that in your write-up, the talk that you gave in oak ridge, you pointed out that we did build 100 plants in the 20 years between 1970 and 1990. and that's absolutely true. and in one of my handouts, i've got the story on what the naval reactors did in eight years when we didn't -- you know, we didn't have any resources. that we had to create everything from scratch, and yet we built 41 full-sized plants in connection with the naval program in eight years. and so i think that's perfectly possible. >> i was going to ask you to say something about the naval program because much of it is
classified, i suppose, and we can't talk about it in public. but what lesson is there to us as we look ahead in the next 20 years from our success or lack of success with the nuclear navy program? >> well, back before we had even proved that the prototype plant would work, we hadn't even gotten to the point where that had produced power, president eisenhower -- he was concerned that the bomb was the only image that anybody ever had of nuclear power and he set up this atoms for peace program and he didn't want a military man to run that but when he looked around there was nobody else in that position to do. in that early stage we didn't even have it going yet and yet we were charged with building the world's first commercial atomic power plant.
and that was in 1953. in 1957, we had -- we didn't even know what we were going to build it out of. it turned out we had to use a different fuel than we thought we were going to build. we had to create a whole new system there. and the remarkable thing about rick overs response to that request was that he had been a strong advocate for classification in terms of produce these weapons, these submarines. but when we get it for nuclear -- for commercial, he said if we're going to do anything useful for the world, this has got to be declassified. it's got to be -- that we got to produce a bunch of technical manuals. we got to get it in the codes of standards in the industry of the world and that whole thing -- he took that message very seriously.
and in the 1955 geneva atoms for peace conference, we presented a big book that thick about this process and all that we had done and so forth. >> so the information was declassified under the -- or much of it under the atoms for peace program so that the rest of the world could benefit from -- >> yeah, and out of that, you know, we helped some of the states develop state code standards for pressure vessels and valves and all this sort of thing. the legacy of that program is now the property of the whole world. >> did you hear about or know about the babcock and wilcox announcement about building 100 25 mega react j jmegawatt reac. do you think that's likely to be successful and what comment would you have about that as a part of a goal to increase the ability of this country to build nuclear